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Obama Tells the Tax TRUTH to Joe the Plumber! (political GDG)

An unscripted moment with an Ohio plumber produced a startling confession from Barack Obama Sunday: The Democrat's "middle-class tax cut" is in fact a scheme to "spread the wealth around."

Obama dropped the mask long enough to tell the truth to Toledo plumber Joe Wurzelbacher - who had asked the Democratic nominee why he wanted to jack up his taxes just for "fulfilling the American dream."

"I'm getting ready to buy a company that makes $250,000 to $280,000 a year," Wurzelbacher had told Obama. "Your new tax plan is going to tax me more, isn't it?"

"It's not that I want to punish your success," Obama replied. "I just want to make sure that everybody who is behind you, that they've got a chance for success, too . . . When you spread the wealth around, it's good for everybody."

At last! The truth outs!

Obama's plan isn't about sinking hooks into Wall Street CEOs and other fat cats, as he usually says. Fact is, there's not enough of them to raise the cash necessary to finance his other grand plans.

No, to do that, he'll have to go after ambitious working-class guys like Wurzelbacher - who's been a plumber for 15 years and is looking to better himself and his family while just maybe creating a few jobs.

The American Dream?

Wurzelbacher personifies it - but Barack Obama seems determined to tax it to death and be done with it, period.

That's been the case all along, of course. What's different is that the Democrat finally said so.

Heretofore, Obama has sought to paint himself as a tax-cutter - claiming he'll slash taxes for 95 percent of Americans.

As we noted yesterday, that's a flat-out lie - not least because nearly half of all tax filers pay no income tax at all. So how can he "cut" their taxes if they don't pay any to begin with?

Answer: tax "credits."

To wit, in part:

* A $1,000 "make work pay" credit.

* A $4,000 college-tuition credit.

* A $6,000 child-care credit.

* A $1,100 bump in the earned-income tax credit.

These aren't to be income-tax deductions - which would be worthless to those who pay no income taxes.

These are to be checks from Washington - with the subsidies expected to grow to more than $1 trillion in 10 years.

That's a massive transfer of wealth.

How does Obama justify it?

"Fairness," he says.

But that's an absurdly radical view of what's "fair."

Remember, Obama's tax hikes target folks who already bear the brunt of the burden: The top 20 percent of earners already pay 69 percent of all federal taxes - and 88 percent of income taxes.

(Contrast that with John McCain's call yesterday for real tax cuts - halving the capital-gains levy, scrapping taxes on unemployment benefits altogether - designed to prime the economic pump.)

Monday, Obama promised a tax policy that would restore "a sense of fairness and balance that will give every American a fair shot at the American dream."

But just a day before, he told Joe Wurzelbacher the truth: No American dream for you, buddy!

Nor anybody else, it seems.

Kevin Walker

Drive is the manifestation of Desire, and measured in Style.Thank you judges who score Style, you are preserving Desire!

One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.

It's a clever pitch, because it lets him pose as a middle-class tax cutter while disguising that he's also proposing one of the largest tax increases ever on the other 5%. But how does he conjure this miracle, especially since more than a third of all Americans already pay no income taxes at all? There are several sleights of hand, but the most creative is to redefine the meaning of "tax cut."

For the Obama Democrats, a tax cut is no longer letting you keep more of what you earn. In their lexicon, a tax cut includes tens of billions of dollars in government handouts that are disguised by the phrase "tax credit.

Mr. Obama is proposing to create or expand no fewer than seven such credits for individuals:

- A $500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple.

- A $4,000 tax credit for college tuition.

- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).

- A "savings" tax credit of 50% up to $1,000.

- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.

- A child care credit of 50% up to $6,000 of expenses a year.

- A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles.

Here's the political catch. All but the clean car credit would be refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers.

Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.

The Tax Foundation estimates that under the Obama plan 63 million Americans, or 44% of all tax filers, would have no income tax liability and most of those would get a check from the IRS each year. The Heritage Foundation's Center for Data Analysis estimates that by 2011, under the Obama plan, an additional 10 million filers would pay zero taxes while cashing checks from the IRS.

The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center. This means that the tax-credit welfare state would soon cost four times actual cash welfare. By redefining such income payments as "tax credits," the Obama campaign also redefines them away as a tax share of GDP. Presto, the federal tax burden looks much smaller than it really is.

The political left defends "refundability" on grounds that these payments help to offset the payroll tax. And that was at least plausible when the only major refundable credit was the earned-income tax credit. Taken together, however, these tax credit payments would exceed payroll levies for most low-income workers.

It is also true that John McCain proposes a refundable tax credit -- his $5000 to help individuals buy health insurance. We've written before that we prefer a tax deduction for individual health care, rather than a credit. But the big difference with Mr. Obama is that Mr. McCain's proposal replaces the tax subsidy for employer-sponsored health insurance that individuals don't now receive if they buy on their own. It merely changes the nature of the tax subsidy; it doesn't create a new one.

There's another catch: Because Mr. Obama's tax credits are phased out as incomes rise, they impose a huge "marginal" tax rate increase on low-income workers. The marginal tax rate refers to the rate on the next dollar of income earned. As the nearby chart illustrates, the marginal rate for millions of low- and middle-income workers would spike as they earn more income.

Some families with an income of $40,000 could lose up to 40 cents in vanishing credits for every additional dollar earned from working overtime or taking a new job. As public policy, this is contradictory. The tax credits are sold in the name of "making work pay," but in practice they can be a disincentive to working harder, especially if you're a lower-income couple getting raises of $1,000 or $2,000 a year. One mystery -- among many -- of the McCain campaign is why it has allowed Mr. Obama's 95% illusion to go unanswered.

Kevin Walker

Drive is the manifestation of Desire, and measured in Style.Thank you judges who score Style, you are preserving Desire!

Obama has accidently proposed his Socialist plans for America to Joe the Plumber ..beautiful.
Socialism is not just an economic system it requires the government to take control of and redistribute a countries resources. This is serious.

Forget Ayers and all of the other stuff this is really what makes Obama dangerous IMO. He could literally begin our country on a path that would increase government control and decrease individual liberty and is using the media and slick sound bites to do it. I hope this catches fire too. Thanks for posting it.

He will rase taxes for all middle class working folks jobs will be lost and the Country will fall!!!

I read a liberal Democrat pundit pointing out with glee that "Nancy Pelosi will be our first Prime Minister." Obama is too inexperienced and powerless in DC politics to control the agenda. He will the rubber stamp to filibuster-proof Democratic majorities in the House and Senate. The unions will get everything they want (including no more secret ballots). The trial lawyers will get everything they want.

I heard a wealthy FTer say that if Obama is elected, he is pulling out all his investment money from our economy and storing it offshore, then going back to college since the government (read "taxpayers") will be paying him to do it.

Biden calls him and those like him "unpatriotic." Others would say he is prudent.

I look at the stock market continue to fall in spite of the bailout, concurrent to Obama's rising chances of winning. And I wonder?

Kevin Walker

Drive is the manifestation of Desire, and measured in Style.Thank you judges who score Style, you are preserving Desire!

I look at the stock market continue to fall in spite of the bailout, concurrent to Obama's rising chances of winning. And I wonder?

There will be a lot of people taking money out of the U.S. economy and putting it elsewhere if Obama is elected. Obama’s tax plan is a sure fire method to destroying what will be left of the economy next year.

EVERY person I've ever talked to that knows about the economy, EVERY economics "guru" I've ever seen interviewed or in writing, and a whole lot of folks that know a WHOLE lot more than I do, ALL say that taxing the corporations at a higher rate is a terrible thing to do ESPECIALLY in an economic downturn. Yet Obama still wants to do it. It makes zero sense to me.
Oh and before someone jumps in and says that he doesn't want to increase the corp tax rate, I will say that he says he doesn't want to increase the rate but wants to decrease write-offs, and "loopholes"(another word for write-offs) which will increase the amount that a corp pays the 35-39% on. Which of course will make the tax rate go up.
I've talked to several that work in world market/economics that say that many corps will leave the country and head for greener grasses. Other countries have much lower rates and several have tax free incentives for several years for companies that move there.